Annual inflation in the euro zone slowed in September to hit 1.1 percent -- it’s lowest in more than three years -- and against analysts’ estimates for the rate of growth in inflation to hold steady at August’s reading of 1.3 percent, data released by Eurostat showed.

A faster-than-expected slowing in the rate of inflation, which is at its lowest level since February 2010, raised concerns about the strength of the economic recovery in the 17-nation bloc and sparked hopes that the European Central Bank could take further measures to aid the anemic recovery in the euro zone.

"We see no inflation risks," Christoph Weil, a European economist at Commerzbank, told Reuters. "There is no reason for the European Central Bank to act on inflation. It can stay with its expansionary policy." 

Excluding volatile components like food, energy, alcohol and tobacco, the euro zone's consumer price index saw a year-on-year increase of 1.0 percent in September, compared to 1.1 percent recorded in August. Economists had expected core inflation to grow at the same rate as seen in the previous month.

The sharpest fall was recorded in energy prices, which dipped about 0.9 percent while food, alcohol and tobacco prices rose at 2.6 percent in the month followed by the price of services, which rose 1.5 percent.

The euro zone's economies are battling a prolonged slowdown amid high unemployment rates and subdued consumer sentiment.

Greece continued to suffer from deflation, while in Italy annual growth in consumer inflation fell to 0.9 percent in September from 1.2 percent in the previous month and versus economists’ expectation of a 1.1 percent growth. Meanwhile, annual producer price inflation in Italy declined by 2 percent from a deflationary rate of 1.3 percent in the previous month.

The Stoxx Europe 600 index lost 0.66 percent, London’s FTSE 100 was down 0.83 percent, Germany's DAX-30 was down 0.88 percent and France's CAC-40 was trading down 1.16 percent.